How to be better tax efficiency in flipping????

Question

Little background: I’ve been doing renovations for 10years, my wife and I have decide to approach the flip and fix business. We have started last mid year and have flipped our first making $18k in profits..we have open new LLC for this business and no longer do renovations for clients. We have developed a relationship with all our subcontractors for over 10 years and are using same subs for ours. I have learned that not many investors will explain how to better tax efficient or how to use its equity...I need to figure how can I go about this? I have asked bank but since I have a cash out equity loan, i can’t pull any equity. I did not go thru hard money lenders or anything I used equity for my house.

We are in our second and been using all cash with I knew I could do different. Example: House was purchase at $93k and tax valued at $150...that’s $40 k plus in equity that I could of used to fix it up.. we are almost done with it and agent says it will list maybe up 190k or low 200’s or even 200.

Which I’m okay with, anything above $150k will be a profit. I need any reading advise or any advise on being more tax efficient as how do I cut taxes down for investments and how can I pull equity? Any information is appreciated

Braden Smith · Answer

You need to find a CPA in your area that is familiar with real estate and more specifically, flipping houses. Never take tax or legal advice from anyone online. A knowledgeable CPA is a must if you plan to continue in this business.

With that being said, flipping is considered active income by the IRS, so it is taxed as ordinary income. There is no getting around that. You can offset your taxes by purchasing rental property and taking depreciation on them, but the IRS will always get their money one way or another.

This may give some more insight:  https://fitsmallbusiness.com/taxes-on-flipping-houses/